Just another WordPress.com weblog

Posts tagged ‘Keynesian economics’

There is a widespread incorrect public perception In India that it has a very large public sector. If anything, the public sector is too small. The US employs persons or approximately 15% of its workforce in all levels of government. The UK employs about 18.5%, 5.6 million of a workforce of 29.7 million. India’s statistics of 17.6 million employed in the public sector of a total workforce of 474 million i.e. 3.7% seems miniscule. Even among those employed, the majority are semi-skilled or unskilled whereas the majority in Western countries are skilled, as is necessitated by the needs of providing health and social welfare benefits. The Indian government employs 162.3 government servants per 100000 persons as compared to 768.1 in the U.S. In an article in 2012, The Hindu, in fact, called the government anaemic.

Why then the public perception?

The problem is that whatever government that exists is so inefficient and corrupt that the little there is seems to be too much. There is a severe shortage of skilled personnel to work in sectors such as health, education, public works etc. but there is no ongoing effort to create such a workforce. Instead, hiring has been, more or less, frozen since 2011 as the government is said to be ‘too big’.

This, when India is actually an example of classical laissez faire. People are left to their means; those with money and power prosper and enjoy resources and facilities while those without attempt mere survival. There is no concept of social security. Even the ability of the state to maintain law and order is not applicable everywhere. Large swathes of the country have only the token presence of a state. On the whole, people are left to do as they deem fit.

‘You can’t make laissez-faire mandatory!’

In a Western country, the government is everywhere. It is omnipresent through the police, in the security cameras, through the laws that govern public property or through working government helplines. India has no emergency response service to match the US 911 or the UK 999. The government exists, in absentia and lets the people rule the land.

This is amply demonstrated by the way that public land is treated by Indians and the way they throw garbage or spit on the street. They know that they can do as they please and nothing can stop them. The Indian spirit is embodied in the classic Indian phrase ‘chalta hai’. Representative of compromise and adaptability in all circumstances, the phrase masks a public apathy towards excellence and demanding of rights considered basic by citizens of developed economies.

Laissez Faire but not Laissez Faire Capitalism

Considering that fiscal spending is considered to be the primary tool for stimulating economic growth in modern Keynesian economic theory, the sums of money actually spent on Central government schemes are not that large with a few exceptions. However, whatever is undertaken is more with the view to offer classic opportunities for graft to the unscrupulous in the government and thus largely a burden on the public exchequer.

On the other hand, it is very hard to do business in India in the organized sector with an interfering government that could arbitrarily impose tariffs, regulations or even tax retrospectively. Indian labour laws and laws governing the establishment of business are hopelessly out of date and favour an economic mindset that went out of fashion half a century ago.

Western Social Capitalism

Modern Western governments, in fact, much more socialist than capitalist in the classical sense. Governments are not just expected to provide civic facilities; they are expected to provide housing, unemployment allowance, pension, and even bail out funds to the occasional big bank. Whatever the problems caused by these massive welfare obligations, it reflects the acceptance of the fact that self-interest may not match with public interest. This mix of capitalism and socialism is the hallmark of the developed economy and necessitates the existence of government bodies to regulate and govern.

The importance of public sector in the Western world

Thus, India represents neither laissez faire capitalism nor Keynesian economics, just unadulterated laissez faire. With India gradually gaining more prominence, who knows whether a few decades from now, like this classic French phrase, even chalta hai may be studied in economics textbooks;hopefully, only as a relic.